Share This Article:

Economic Definition of value-added tax. Defined.

Offline Version: PDF

Term value-added tax Definition: A tax on the extra value added during each stage in the production of a good. Most of the stuff our economy produces goes through several "stages," usually with different businesses. In each stage, resources do their thing to the good to make it a little more valuable. For example, an ice cream store can take 50 cents worth of ice cream, fudge, and whipped topping and turn it into a hot fudge sundae that's valued at $1.50. The efforts of the ice cream resources thus add $1 in value. A value-added tax is based on this extra value. While it's been debated off and on in the United States, a value-added tax is commonly used in Europe.

 

« value added | value in exchange »

Permalink: https://glossary.econguru.com/economic-term/value-added+tax

Alphabetical Reference to Over 2,000 Economic Terms